Correlation Between Alphabet and Vanguard Inflation

Can any of the company-specific risk be diversified away by investing in both Alphabet and Vanguard Inflation at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alphabet and Vanguard Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class C and Vanguard Inflation Protected Securities, you can compare the effects of market volatilities on Alphabet and Vanguard Inflation and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alphabet with a short position of Vanguard Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Vanguard Inflation.

Diversification Opportunities for Alphabet and Vanguard Inflation

0.63

Correlation Coefficient

Alphabet  Vanguard Inflation

Poor diversification

The 3 months correlation between Alphabet and Vanguard is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Vanguard Inflation Protected S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Inflation and Alphabet is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alphabet Inc Class C are associated (or correlated) with Vanguard Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Inflation has no effect on the direction of Alphabet i.e., Alphabet and Vanguard Inflation go up and down completely randomly.

Pair Corralation between Alphabet and Vanguard Inflation

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 6.5 times more return on investment than Vanguard Inflation. However, Alphabet is 6.5 times more volatile than Vanguard Inflation Protected Securities. It trades about 0.13 of its potential returns per unit of risk. Vanguard Inflation Protected Securities is currently generating about 0.12 per unit of risk. If you would invest  16,585  in Alphabet Inc Class C on May 4, 2025 and sell it today you would earn a total of  2,410  from holding Alphabet Inc Class C or generate 14.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Vanguard Inflation Protected S

Alphabet Class C

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Inflation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Inflation Protected Securities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Vanguard Inflation

The main advantage of trading using opposite Alphabet and Vanguard Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Vanguard Inflation can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Inflation will offset losses from the drop in Vanguard Inflation's long position.

The idea behind Alphabet Inc Class C and Vanguard Inflation Protected Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.